1. Quick personal loans: An alternative to credit card loans?

Quick personal loans: An alternative to credit card loans?

There is a lot of pressure on individuals of increasing lifestyle expenses and inflation, not to mention decelerating remunerations. No wonder our country witnessed a steep rise in the popularity of credit cards over the last two decades.

Updated: April 21, 2017 1:10 PM
There are some credit card customers who are adept at picking the best one out there, use the cards’ special features and benefits and end up saving money.

By Aditya Kumar

There is a lot of pressure on individuals of increasing lifestyle expenses and inflation, not to mention decelerating remunerations. No wonder our country witnessed a steep rise in the popularity of credit cards over the last two decades. Nobody admits it; but many are trapped in a vicious cycle of revolving credit. There are some credit card customers who are adept at picking the best one out there, use the cards’ special features and benefits and end up saving money. But they are a few and far between while the rest (who try to copy them) fall flat and become more and more entangled in high-interest debts. This needn’t be so anymore. The recent past saw the formidable entry of alternative players in the playground and many of these companies have become instant hits among users, especially those in the metro cities. Their quick personal loans are preferred over even credit card loans currently.

Comparing Credit Card Loans & Personal Loans
Credit card loans are useful only if you can repay the amount borrowed in time. The minute you cross the due payment date, the interest rate shoots up alarmingly. On top of that, they will levy a not-so-small late payment charge too. The way you handle credit card loans is a direct indicator of your credit behavior, which can impact your credit score. It is not easy to fight the temptation to use credit at whim and practice restraint while personal loans do not offer this kind of leeway or luxury. Lenders allow you to take out personal loans only if they are convinced of your credit worthiness. The maximum EMI they allow is 30 to 40 percent of your monthly income, in a way forcing you to be prudent about your expenses.

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The table given below shows how one can save almost Rs 42,000 on a loan amount of Rs 100,000 by opting for a personal loan instead of a credit card loan, which is a substantial amount.

Personal Loans

Credit Card Loans

Tenure

Interest rate

EMI

Total Amount Paid

Tenure

Interest rate

EMI

12 months

14%

8,979

1,07,745

12 months

36%

10,047

You SAVE Rs. 12,810

24 months

14%

4,802

1,15,231

24 months

36%

5,905

You SAVE Rs. 26,483

36 months

14%

3,418

1,23,040

30 months

36%

4,581

You SAVE Rs. 41,854

Why are customers shifting their allegiance from credit card loans to personal loans?

Getting a loan was a time-consuming and painful affair for many, not long ago. This is why people have opted for credit card loans indiscriminately despite the staggeringly higher interest rates. However, new fintech companies formed in the last five years have managed to change this perception, offering incredibly fast emergency loans and other similar financial products and services. The component pieces they look at as part of eligibility and risk assessment are income, credit score of applicants, their employment history and nothing more.

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The main value offered by online loan providers is customized loans at reduced interest rates. A person who visits the website of an online lender can complete the application form while chatting with the company official via chat bot featured on their web page. For instance, fintech firms like Qbera reach out to prospective clients the minute they enter the website and this promptness is what attracts people to this kind of banking. The process is so simple that money can be credited in the applicant’s account within 24 hours, provided all the requested documents (ID proof, income/employment proof and bank statements) are submitted.

One can say that the technology is the real star here, thanks to the digital wave. Users can discover and access the best loan products online and lenders can check their creditworthiness in seconds! Individuals who repay their EMIs and dues on time will be happy to know that it will be recorded as ‘good credit behavior’ and will work in their favor in future in many ways. Being in the company’s good books will result in heaps of benefits such as more loan amount, lower interest rates, lower fees and charges and even more flexible tenures because all firms go all-out to retain quality customers.

(The author is Founder & CEO, Qbera.com)

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